The international Government Finance Statistics (GFS) standard as promulgated by the International Monetary Fund (IMF) recommends that opening and closing 'stock' values be reconciled with all 'flows' occurring throughout the year. The standard is based on an analytical framework in which all changes in the values of stocks from one year to the next can be fully explained by the flows that have occurred during that year.

Institutional units hold assets (financial and non-financial) and incur liabilities (which by definition are financial). The level of these assets and liabilities at any point in time is the stock. The difference between assets and liabilities is net worth, which is a measure of the 'wealth' of units or of government. Anything which causes a change in these stocks of assets and liabilities is a flow. Flows are disaggregated into transactions and 'other economic flows'. A transaction is, for the most part, an interaction between two units by mutual agreement, whereas an 'other economic flow' is a change in the volume or value of a stock of a unit not resulting from a transaction.

By definition, the value of a stock at the end of a period is the sum of the stock at the beginning of the period and all the flows affecting that stock which took place during the period, i.e. S1 = S0 + F1, where S0 and S1 represent the values of a specific stock at the beginning and end of an accounting period, and F1 represents the net value of all flows during the period relevant to that particular stock.

Statistics on transactions giving rise to revenues and expenses are published as part of the GFS operating statement. Revenues are defined as transactions which increase net worth whereas expenses are transactions which decrease net worth. The difference between revenues and expenses, therefore, represents the change in net worth due to transactions. This equates to the GFS net operating balance.

Other economic flows can be disaggregated into movements in asset/liability values resulting from price changes ('revaluations') and those resulting from volume changes ('other volume changes').

Revaluations result from changes to the value of the assets and liabilities held. Revaluations can accrue to financial assets such as bonds and bills, shares and other forms of equity, as well as non-financial assets such as land and buildings.

Other volume changes refer to events that include:

the recognition or de-recognition of assets or liabilities on the balance sheet – e.g. when resources become economically exploitable, or when an asset is no longer providing an economic benefit, and so is removed from the balance sheet

changes in the quantity or quality of the existing asset – these typically result from catastrophic losses through natural disasters, changes in the volume of natural assets such as fish or forest stocks, creation, discovery, cancellation or seizure of assets, or quality differences arising from events such as a change in the expected life of the asset

changes in the classification of assets – these usually arise when the use of an asset changes, e.g. if the use of a parcel of public land changes from recreational use to industrial use.

The net effect of all revaluations and other volume changes occurring through the year represents the change in net worth due to other economic flows.

Since the values of stocks at the end of a year must be equal to their values at the start of a year, plus all transactions and other economic flows affecting them during the year, it follows that the total change in net worth during a given year is equal to the change in net worth due to transactions, plus the change in net worth arising from other economic flows.

When working with reported data, it is often assumed that the difference between opening and closing net worth and the change in net worth due to transactions is attributable to the change in net worth due to other economic flows (i.e. other economic flows is effectively used as a balancing item). However, to ensure data quality it is necessary to independently collect and calculate the change in net worth due to other economic flows. In situations where the reported data do not add through, it is not necessarily the case that the data quality issue is in the other economic flows component of the framework. Where data quality is high throughout the reported data set, the change in net worth as derived via the balance sheet will be consistent with the sum of transaction and other economic flows.

COMMONWEALTH GENERAL GOVERNMENT – STATEMENT OF STOCKS AND FLOWS

The Commonwealth Government publishes a statement of other economic flows for the general government sector. This statement outlines all revaluations and other volume changes occurring throughout the year, which allows a full reconciliation of stocks and flows. This information allows the Australian Bureau of Statistics (ABS) to disaggregate other economic flows into price and volume effects. While some states also publish a statement of other economic flows, the majority currently do not. For local government, information on the components of other economic flows are also generally unavailable. Accordingly, the ABS does not have enough information on which to disaggregate other economic flows into its two components across the state and local levels of government.

The statement of stocks and flows for the Commonwealth general government sector is presented in Table 1. During 2012–13 the net worth of the Commonwealth general government sector increased by $48,832m. This was the result of a GFS net operating balance (which reflects the change in net worth due to transactions) of –$21,131m, offset by revaluations of $69,575m and other volume changes of $388m. The key contributor was revaluations on the liabilities side which was driven by unfunded superannuation and other employee entitlements (–$41,778m), and borrowing (–$5,879m). Revaluations on the assets side of the statement were less significant and driven by other non-equity assets ($6,778m), equity assets ($6,416m), and Investments, loans and placements ($6,409m).

TABLE 1, COMMONWEALTH – General Government – Statement of Stocks and Flows

Opening stocks as at 1 July 2012

Transactions

Revaluations

Other volume changes(a)

Closing stocks as at 30 June 2013

$m

$m

$m

$m

$m

Assets

Financial assets

Cash and deposits

2 523

–429

–

–

2 094

Advances paid

33 962

4 802

–1 716

–

37 048

Investments, loans and placements

98 492

6 197

6 409

–

111 098

Other non-equity assets

56 475

–

6 778

–

63 253

Equity

50 010

2 613

6 416

–

59 039

Total

241 463

13 182

17 887

–

272 532

Non-financial assets

Land and fixed assets

94 328

451

1 572

388

96 739

Other non-financial assets

2 216

–1 124

1 095

–

2 187

Total

96 544

–674

2 668

388

98 926

Total

338 007

12 509

20 554

388

371 458

Liabilities

Deposits held

3 701

95

–10

–

3 786

Advances received

–

–

–

–

–

Borrowing

279 898

26 445

–5 879

–

300 464

Unfunded superannuation and other employee entitlements

249 889

–

–41 778

–

208 111

Other provisions

13 931

–

449

–

14 380

Other non-equity liabilities

38 706

7 233

–1 937

–

44 002

Total

586 125

33 773

–49 154

–

570 744

GFS Net worth

–248 119

–21 131

69 575

388

–199 287

Net debt

148 621

. .

. .

. .

154 010

Net financial worth

–344 663

. .

. .

. .

–298 212

. . not applicable

– nil or rounded to zero (including null cells)

(a) Source: Department of Finance, Consolidated Financial Statements for the Year Ended 30 June 2013, December 2013.

STATE AND LOCAL GENERAL GOVERNMENT – STATEMENT OF STOCKS AND FLOWS

Both the state and local general government Statements of Stocks and Flows (Table 2 and Table 3 respectively) highlight the significance of other economic flows. During 2012–13 the net worth of the state general government sector increased by $44,478m, driven by $49,636m from other economic flows. The key contributor was other economic flows on the assets side which was driven by equity assets ($18,079m). On the liabilities side, the main contributor to other economic flows was unfunded superannuation and other employee entitlements (–$23,434m).

The net worth of the local general government sector increased by $14,287m in 2012–13. Other economic flows contributed $8,150m to this movement.

TABLE 2, STATE – General Government – Statement of Stocks and Flows

Opening stocks as at 1 July 2012

Transactions

Other Economic Flows

Closing stocks at 30 June 2013

$m

$m

$m

$m

Assets

Financial assets

Cash and deposits

15 749

856

1 081

17 686

Advances paid

7 131

–254

4 156

11 033

Investments, loans and placements

55 660

1 977

1 030

58 667

Other non-equity assets

21 369

237

3 081

24 687

Equity

257 309

–3 000

18 079

272 388

Total

357 218

–185

27 427

384 460

Non-financial assets

Land and fixed assets

559 613

10 613

8 138

578 364

Other non-financial assets

2 064

388

283

2 735

Total

561 677

11 001

8 421

581 099

Total

918 895

10 816

35 848

965 559

Liabilities

Deposits held

4 425

–135

–178

4 112

Advances received

3 394

1

–375

3 020

Borrowing

97 323

17 594

6 979

121 896

Unfunded superannuation and other employee entitlements

180 770

–62

–23 434

157 274

Other provisions

9 033

–

668

9 701

Other non-equity liabilities

20 590

–1 424

2 553

21 719

Total

315 535

15 974

–13 787

317 722

GFS Net worth

603 360

–5 158

49 636

647 838

Net debt

26 603

. .

. .

41 643

Net financial worth

41 683

. .

. .

66 739

. . not applicable

– nil or rounded to zero (including null cells)

TABLE 3, LOCAL – General Government – Statement of Stocks and Flows

Opening stocks as at 1 July 2012

Transactions

Other Economic Flows

Closing stocks at 30 June 2013

$m

$m

$m

$m

Assets

Financial assets

Cash and deposits

9 342

–330

140

9 152

Advances paid

25

–26

27

26

Investments, loans and placements

11 623

663

–1 893

10 393

Other non-equity assets

3 539

–258

498

3 779

Equity

9 038

–26

–1 870

7 142

Total

33 567

22

–3 097

30 492

Non-financial assets

Land and fixed assets

314 472

5 109

13 495

333 076

Other non-financial assets

1 852

186

–105

1 933

Total

316 324

5 296

13 389

335 009

Total

349 890

5 318

10 293

365 501

Liabilities

Deposits held

431

3

29

463

Advances received

22

–30

29

21

Borrowing

10 087

971

331

11 389

Unfunded superannuation and other employee entitlements

3 470

–7

–269

3 194

Other provisions

362

144

–54

452

Other non-equity liabilities

4 005

–1 900

2 076

4 181

Total

18 377

–819

2 142

19 700

GFS Net worth

331 514

6 137

8 150

345 801

Net debt

–10 449

. .

. .

–7 698

Net financial worth

15 190

. .

. .

10 792

. . not applicable

– nil or rounded to zero (including null cells)

For more information on the statement of stocks and flows, refer to Table 2.1 in Australian System of Government Finance Statistics: Concepts, Sources and Methods (cat. no. 5514.0.55.001) electronic version or (cat. no. 5514.0) pdf version and Chapter 4 of the International Monetary Fund's Government Finance Statistics Manual 2001.

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